European stock indices drift lower

Nasdaq and S&P set new records

US stock indices ended Monday’s session mixed. The tech-heavy NASDAQ led gains, closing up 0.4% and at a fresh record high. The S&P 500 added just 0.1%, but that, too, was enough for the index to register yet another record close. 

Both indices were helped by a rally in Alphabet, parent to Google and YouTube, among other things, which has posted decent gains over the past fortnight.

This comes ahead of Alphabet’s second quarter earnings report after tomorrow’s close. Yet despite recent gains, Alphabet has had a fairly dismal year so far. It was only yesterday’s rally which saw the tech giant finally recover losses from the last six and a half months. Investors want to hear some good news from the company, particularly in terms of progress in its AI projects.

Source: TN Trader

In contrast, the Dow dipped into the red by the close, weighed down by weakness in cyclical sectors. The small-cap Russell 2000 also lost ground, ending the session 0.4% lower.

US stock index futures were lower across the board this morning, reflecting some pause after the recent strong run. However, with earnings in focus and some decent upside momentum, bulls appear to be in control for now.

It should be noted that the daily MACDs on both the S&P and NASDAQ show some negative divergence. That is, despite the ongoing rally, the upside momentum is showing signs of slowing.

Magnificent Seven in focus

Earnings optimism continues to underpin market sentiment, with an impressive 85% of S&P 500 companies having beaten estimates so far, although that’s only 12% of the index’s constituents.

More than 60 companies in the S&P 500 have already reported. Commentary from management teams is closely scrutinised for signals on macro trends, consumer resilience and the fallout from President Trump’s tariff threats. Guidance and updates on AI-driven spending have also dominated discussions, particularly as expectations build around the Magnificent Seven.

Today, the spotlight shifts to Philip Morris, Coca-Cola and Lockheed Martin. But all eyes are on Wednesday’s reports from Alphabet and Tesla, two key components of the mega-cap tech trade. With much of the market’s strength this year concentrated in this cohort, their performance and forward guidance could be pivotal for the broader market tone.

Asian Pacific indices mixed in tepid trade

Asia-Pacific stock indices have had a relatively uneventful start to the week. The Japanese Nikkei reopened after yesterday’s Bank Holiday and Sunday’s upper house election result to end the session down 0.1%. This was a good result considering that Japan’s Prime Minister Shigeru Ishiba’s ruling coalition lost its majority in a historic defeat.

This has raised concerns about how the country will now be governed, particularly as Japan has been unable to agree on trade terms with the Trump administration.

Meanwhile, there was a second day of gains for Chinese stock indices. Hong Kong’s Hang Seng and the Shanghai Composite rose 0.5% and 0.6% respectively. Investors continued to increase their exposure, encouraged by news over the weekend that the construction of an enormous hydropower project on Tibet’s Yarlung Tsangpo river would start soon.

Yen consolidates

FX markets were mixed overnight. The Japanese yen steadied in early trade following yesterday’s sharp rally on safe-haven demand. This followed Sunday’s surprise election result, which saw Japan’s ruling coalition party lose its majority.

Source: TN Trader

Meanwhile, the US dollar edged higher. Yesterday, the Dollar Index dropped back below the 98 level. This could be a modest corrective pullback following the dollar’s recovery since the beginning of the month.

Alternatively, the selling could be the start of a bigger move, which could take the Dollar Index to fresh multi-year lows. Market participants are now turning their attention to Federal Reserve Chair Jerome Powell, who is scheduled to speak later today at 13:30 BST. His remarks could influence short-term FX positioning, especially given fluctuating inflation and growth expectations.

The euro and sterling were little changed in early trade and continue to hold in tight ranges.

Gold and silver ease after recent spike

Precious metals saw mild declines in early Tuesday trade, following a strong session Monday that pushed both metals toward the upper ends of their recent trading ranges. Gold hit a five-week high before pulling back slightly, with the $3,400 level acting as resistance once again. The lack of follow-through suggests the market may be waiting for a catalyst, likely from Powell or incoming economic data, before making its next significant move.

Source: TN Trader

Silver also slipped after retesting resistance around $39 per ounce. Although sentiment remains constructive, bulls appear hesitant to add aggressively at these levels without a clear breakout, leaving both metals consolidating for now.

Source: TN Trader

Oil drifts lower

Crude oil prices drifted lower overnight. A combination of easing geopolitical tensions, together with a plentiful supply, continues to weigh on sentiment. OPEC+ has contributed to the supply side of the equation as it continues to unwind previous production cuts at a faster-than-expected rate.

Meanwhile, there’s uncertainty over the outlook for demand growth. This has been declining significantly in China as its economy continues to struggle from its property bust. While its recent GDP release suggested that the country is growing robustly, few Western economists take China's government-complied statistics that seriously.

Despite some recent attempts to trigger a significant rally, the lack of upside momentum and underlying demand concerns have kept oil rangebound. For now, it looks as if the short side holds the upper hand, especially in the absence of fresh drivers.

Traders will be watching closely for inventory data and any new developments around Russian sanctions or OPEC commentary, which could spark renewed volatility.

Source: TN Trader

Natural Gas slides further

Natural Gas prices resumed their decline following Monday’s steep 7% sell-off. Though speculative long positions are likely being trimmed, volatility in the gas market remains high, and a reversal could be swift. Traders are monitoring closely for any signs of stabilisation - but for now, the path of least resistance appears to be down. 

Crypto mixed, bitcoin retreats from 120K

Cryptocurrency markets were mixed during the session. Bitcoin advanced modestly, making back most of its weekend losses. But it was unable to retest the key $120,000 threshold, where it has repeatedly faced resistance.

The lack of momentum above that key level has caused some hesitation among bulls, with price action remaining choppy. Despite this, Bitcoin continues to consolidate following a strong rally earlier this month, which took it to fresh all-time highs. Ether fell around 2% in early trade as profit-taking kicked in.

Despite the softer tone, sentiment in the space remains constructive, with traders still optimistic about long-term upside potential. However, near-term direction hinges on whether Bitcoin can decisively reclaim $120,000. 

Ether may have to experience a period of consolidation to absorb its recent sharp gains. It seems unlikely that it could take out its all-time highs above $4,000 when its daily MACD is significantly overbought.

VIX flat, market shows no fear

The VIX (Volatility Index) was little changed this morning, holding steady from yesterday. The lack of movement suggests that investors remain calm, even as they digest President Trump’s feud with Fed Chair Jerome Powell, the ongoing trade war and a wave of earnings reports.

Despite looming catalysts like Mr Powell’s speech later today and the 1st of August tariff deadline, the VIX’s subdued posture signals continued investor confidence and elevated risk appetite. Unless something unexpected rattles sentiment, it appears likely that volatility could stay contained in the short term.

Market outlook

US stock indices continue to make history, with the NASDAQ and S&P 500 posting fresh records as tech leads the charge. Earnings have so far exceeded expectations, and this is encouraging the bulls to stay long. But trade tensions between the US and EU are casting a shadow over European markets.